Making investment is not “one-time process”
According to media reports, around Rs. 220 billion of Indian investors’ money is lying unclaimed with insurance companies, mutual funds, corporate houses and banks.
Investors made these investments but never claimed them after maturity. Making investment is not a “one-time process”. You can’t just buy an insurance policy or invest in a mutual fund, savings bank account or other financial instruments and forget it. You need to “track your investments” on regular basis.
Keeping a track on your investments regularly is necessary to understand how they are doing so that you can buy or sell at the right time. An updated information about your investments will also help you comply with the income tax laws—you need the buy-sell data for claiming exemptions or paying capital gains tax while filing the returns.
The media reports said that life insurance industry has about Rs. 17.24 billion unclaimed funds lying with it. Among the unclaimed funds include policy benefits paid out, but not encashed by policyholders, maturity benefits lying unclaimed or death claims not filed by nominees… Read more
SEBI: Route tax-saving Rajiv Gandhi Equity Savings through MF
To minimise risk associated with direct stock investment for new investors, SEBI (Securities and Exchange Board of India) has asked the government to route tax-saving Rajiv Gandhi Equity Savings Scheme (RGESS) through mutual fund.
On 19th May, the market regulator has submitted a proposal in this regard to the finance ministry. According to SEBI, the first time investors may not have adequate information about the stock market and they should enter the market through institutional investors.
In Budget 2012, for those with less than Rs. 1 million income, a new tax deduction was introduced for direct equity investments. Under the RGESS, investor will be able to claim 50% of their investments in direct equity up to the maximum investment limit of Rs. 50,000. The investment is subject to a lock-in period of three years, similar to the current equity linked saving schemes (ELSS).
The modalities of the scheme are not yet specified, and further details are still awaited. A retail investor can avail the scheme only once in a life time. This is the first-ever tax benefit scheme announced by the government to encourage retail investors participation in the equity market. By offering this scheme, the government aims at channelising household savings into stock markets. SEBI also said there would be clarity on the ELSS once the Direct Taxes Code (DTC) Bill is finalised.
SEBI to monitor unregulated funds
On 21st May, the Securities and Exchange Board of India (SEBI) has notified alternative investment funds (AIF) regulations to check unregulated funds. The market regulator also wants to encourage formation of new capital and consumer protection.
The SEBI has divided private pool of capital into three broad categories—venture capital, private equity and hedge funds. The new regulations have replaced the former venture capital funds norms. However, the existing venture capital funds will continue to be monitored by the earlier norms till the existing scheme managed by the fund is closed.
The regulator also said these funds should not include more than 1,000 investors and the minimum investment amount should not be less than Rs. 10 million. SEBI has also mandated that sponsors should contribute at least 2.5% of the initial corpus.
Fund managers exit BHEL on weak order book
The mutual fund industry has been constantly off-loading its investment in Bharat Heavy Electricals Ltd (BHEL)—India’s biggest power-equipment maker. Over the past one-year, BHEL’s shareholding pattern is constantly declining.
In March 2011, mutual funds held 7.03% share in BHEL, which has declined to 5.89% in December 2011. For the fourth quarter of the financial year ended 31 March 2012, fund managers literally dump the stock of this company from their portfolios due to its poor earnings visibility and weakening order book.
According to BHEL’s shareholding pattern as on 31 March 2012, mutual funds held about 1.44% share in the company compared to 7.03% shares held by the mutual funds in March 2011.
During FY11-12, New Delhi-based company has struggled not only to acquire new orders but has also faced cancellations of the orders that it had already received due to issues like non availability of coal, land and financing and also dilemma in getting environmental clearances for the industrial projects.
The intense competition from the Chinese power equipment manufacturer is another trouble for BHEL. For FY11-12, BHEL’s order inflows plunged 63.5% to Rs. 220.96 billion, registering the biggest drop in 10 years. BHEL's market share in the BTG (boiler-turbine-generator) space stood at around 65% in 2007 and has now come down to about 40%.
Most analysts have forecast a flat or marginal drop in earnings growth in fiscal 2013 from last year. Investor sentiment towards BHEL will hinge primarily on its ability to gain more orders in the near to medium term.
Fund Managers’ Speak
Its tomorrow that matters: Prashant Jain
In the long run, markets do not sustain at either overvalued or undervalued levels, rather move close to fair values.
Good returns are seldom made on investments made in good times. Rather, good returns are typically made on investments made in adverse times. There is a fair value for listed companies, just like for companies that are not listed.
In good times when the stock markets are doing well, companies typically trade above fair values and in adverse times when markets are not doing well they tend to trade below fair values. In the long run, markets do not sustain at either overvalued or undervalued levels, rather move close to fair values. This is why investments made in adverse times typically yield above average returns and vice versa… Read more
Reform in India: A Work in Progress
India has recently found itself in the uncomfortable position of having the media spotlight on some of its struggles with corruption, says Mark Mobius
The global investment community has been up in arms (and rightly so) about the Indian government’s attempt to address possible past tax evasion through retroactive tax measures. Many investors started to express their disapproval by withdrawing their dollars, and amid the pressure, the Indian Finance Ministry decided to hold off on enacting the “general anti-avoidance rule” (GAAR) for a year. I believe this is a step in a positive direction, although the debate has simply been delayed and not completely resolved. And, retroactive capital gains taxes are still on the table… Read more
Smaller cities invest more in MFs in H2 of FY11-12
According to AMFI (Association of Mutual Funds in India) data, the industry’s assets under management (AUM) as on 31 March 2012 stood at Rs. 5.87 trillion against Rs. 6.42 trillion on 30 September 2011.
It is reported that between the six month period (from 30 September 2011 and to 31 March 2012), the proportion of assets contributed by Tier-I, II & III cities in AUM of the Indian mutual fund industry rose 3.63% to 28.88%.
These cities include Pune, Ahmedabad, Jaipur, Lucknow, Patna, Ludhiana, Varanasi, Indore and Bhubaneshwar, among others. In absolute terms, these cities contributed Rs. 75 billion more to the industry's AUM during the second half of the previous financial year.
However, in the same period the contribution from major cities—Mumbai, New Delhi, Bengaluru, Chennai and Kolkata—declined from 74.75% to 71.12%. In terms of assets, the contribution declined to around Rs. 622 billion.
The figures indicated that Indian investors from smaller cities have invested more in mutual funds during the second half of the previous financial year.
PMS business grows 118% to Rs. 5.14 trillion in April 2012
According to the SEBI (Securities and Exchange of India) data, portfolio management services (PMS) business grew 118% year-on-year to Rs. 5.14 trillion in April 2012. However, the business lost around 1% of its total clients who had taken PMS in April 2011.
A PMS account is an investment portfolio in stocks, debt and fixed income products managed by a professional money manager that can potentially be tailored to meet specific investment objectives. The advisor receives a mutually agreed fee in return for his advice.
The average value of a client’s portfolio grew 120% to Rs. 63 million in April 2012 against Rs. 29 million in April 2011. The number of clients in the discretionary PMS business declined 7% to 64,688 in April 2012 compared to 69,476 in April 2011. However, its portfolio value zoomed 207% to Rs. 4.26 trillion. The average value of the client’s portfolio jumped 230% to Rs. 66 million.
In discretionary PMS, the investment is at discretion of the fund manager and client has no intervention in the investment process.
Number of non-discretionary PMS clients increased 42% to 5,954 and the portfolio value rose 85% to Rs. 188.59 billion. The ticket size increased 30% to Rs. 32 million.
Under non-discretionary PMS, the portfolio manager only suggests the investment ideas. The choice as well as the timings of the investment decisions rest solely with the investor. However the execution of the trade is done by the portfolio manager.
The PMS advisory business lost 21% portfolio value in one year to Rs. 692.49 billion. Client additions rose 28% to 10,830. Hence the ticket size/client went down to Rs. 64 million, down 38%.
Reliance AMC net profit zooms 57% to Rs. 4.58 billion for FY11-12
Reliance Capital Asset Management Company (AMC)—India’s second-largest fund house in terms of asset base—has reported a consolidated net profit of Rs. 3.29 billion during the quarter ended 31 March 2012, against a net loss of Rs. 60 million during the corresponding period last year. During the March 2012 quarter, the company saw an increase of 25% in its total income to Rs. 20.02 billion.
For the financial year ending 31 March 2012, the company’s net profit zoomed 57% to Rs. 4.58 billion. Reliance AMC total income for FY11-12 increased to Rs. 66.27 billion against Rs. 55.36 billion in the corresponding previous period—an increase of 20%.
The high net results were mainly due to stake sale in the life insurance business, and increase in top line of commercial finance and broking and distribution businesses. As on 31 March 2012, the net worth of the company surged 50% to Rs.116.96 billion.
Ambit Pragma Fund II reaches first close for $150 million
On 22nd May, Ambit Pragma announced the initial close of its new Ambit Pragma Fund II with firm commitments of $77 million. The fund anticipates a final close by March 2013. CDC and IFC, existing investors from Fund I anchored the new fund, and new institutional investors Unilever and DEG have also committed to Ambit Pragma Fund II.
Ambit Pragma Fund II is a small cap buyout and growth capital fund with a goal to invest in five high growth sectors—entertainment, healthcare, FMCG, logistics and infrastructure services. The average investment size will be $15 million in companies with revenues between $5 to $15 million… Read more
What is a mutual fund?
Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.
Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced… Read more
History of mutual funds in India
The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors.
Unit Trust of India was the first mutual fund set up in India in 1963. In early 1990s, the government allowed public sector banks and institutions to set up mutual funds… Read more
What is Sovereign Wealth Fund?
Sovereign Wealth Fund (SWF) seems to be the new buzz of the town. Before getting into any other details, first let us understand what SWF really means. A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments.
Sovereign wealth funds invest globally. The Securities and Exchange Board of India (SEBI) has allowed sovereign wealth funds from countries having Comprehensive Economic Co-operation Agreement (CECA) with India to buy up to a maximum of 20% stake in any listed company without making any obligations like mandatory public offer.
Finance ministry’s chief economic advisor Kaushik Basu says that the country should seriously consider setting up a sovereign wealth fund. There are more than 50 sovereign wealth funds managing assets worth nearly $3 trillion.
UK Sinha re-elected as chairman of Asia Pacific Regional Committee of IOSCO
The Securities and Exchange Board of India (SEBI) chairman, UK Sinha, has been re-elected chairman of the Asia Pacific Regional Committee of the International Organisation of Securities Commissions.
Mr Sinha will head the committee until May 2013. The SEBI Chairman was re-elected during IOSCO's 37th annual conference held in Beijing.
IOSCO is an international policy forum for securities market regulators. IOSCO members regulate more than 95% of the world’s securities markets in over 100 jurisdictions.
Bharti AXA appoints Alok Singh as fund manager for Bharti AXA Regular Return Fund
Bharti AXA Mutual Fund has announced change in fund manager of Bharti AXA Regular Return Fund from 21st May. Alok Singh has replaced Ramesh Rachuri and Gaurav Kapur.
Mr. Singh aged 36 is chief investment officer-fixed income and key personnel of Bharti AXA AMC. He holds B.com, PGDBA, CFA degrees. He has around 12 years of experience, including seven years in mutual fund industry.
ICICI Pru MF declares dividend for FMP Series 49-3 Years Plan B
ICICI Prudential Mutual Fund has announced 29 May 2012 as the record date for declaration of dividend on the face value of Rs. 10 per unit under the retail dividend option of ICICI Prudential Fixed Maturity Plan Series 49-3 Year Plan B.
The quantum of dividend will be Rs. 0.4273 per unit as on the record date. The scheme recorded NAV of Rs. 10.4790 per unit as on 22 May 2012.
The investment objective of the plan under the scheme is to seek to generate regular returns by investing in a portfolio of fixed income securities/debt instruments which mature on or before the date of maturity of the plan/scheme.
DSP BlackRock MF launches two fixed maturity plan
DSP BlackRock Mutual Fund has launched two new fixed maturity plan named as DSP BlackRock FMP-Series 51-12M and DSP BlackRock FMP-Series 52 - 9M, close-ended income schemes.
The primary investment objective of the schemes is to seek to generate returns and capital appreciation by investing in a portfolio of debt and money market securities. The schemes will invest only in such securities which mature on or before the date of maturity of the schemes. The schemes offer a choice of two options, growth option and dividend payout option. The minimum application amount is Rs. 5,000… Read more
ICICI Pru MF announces change in minimum application amount for schemes
ICICI Prudential Mutual Fund has announced change in minimum application amount of ICICI Prudential Income Plan-Institutional Option, ICICI Prudential Income Opportunities Fund- Institutional Option, ICICI Prudential Short Term Plan- Institutional Option and ICICI Prudential Long Term Plan-Premium Plus Option. Accordingly, the minimum application amount will be Rs. 5 billion under each scheme.
Birla Sun Life Fixed Term Plan-Series FL launched
Birla Sun Life Mutual Fund has launched Birla Sun Life Fixed Term Plan-Series FL, a close ended income scheme with the duration of 368 days from the date of allotment. The new issue will be open for subscription from 28th May and closes on 31 May 2012.
The investment objective of the scheme is to generate income by investing in a portfolio of fixed income securities maturing on or before the duration of the scheme… Read more
Reliance Fixed Horizon Fund-XXII-Series 5 launched
Reliance Mutual Fund has launched a new fund named as Reliance Fixed Horizon Fund-XXII-Series 5, a close ended income scheme with the duration of 186 days from the date of allotment. The new issue will close on 29 May 2012.
The primary investment objective of the scheme is to generate returns and growth of capital by investing in a diversified portfolio of central, state government securities and other fixed income/debt securities maturing on or before the date of maturity of the scheme with the objective of limiting interest rate volatility. The scheme offers two options viz. growth and dividend payout option… Read more
Reliance Fixed Horizon Fund-XXII-Series 9 launched
Reliance Mutual Fund has launched a new fund named as Reliance Fixed Horizon Fund - XXII - Series 9, a close ended income scheme with the duration of 366 days from the date of allotment. During the New Fund Offer (NFO) the scheme will offer units at Rs. 10 per unit. The new issue will be open for subscription from 25 May and will close on 31 May 2012.
The primary investment objective of the scheme is to generate returns and growth of capital by investing in a diversified portfolio of central, state government securities and other fixed income/ debt securities maturing on or before the date of maturity of the scheme with the objective of limiting interest rate volatility. The scheme offers two options viz. growth and dividend payout option… Read more
DWS Fixed Maturity Plan-Series 14 launched
Deutsche Mutual Fund has launched a new fund named as DWS Fixed Maturity Plan-Series 14, 370 days close ended debt fund. The new issue will close on 30 May 2012.
The investment objective of the scheme is to generate income by investing in debt and money market instruments maturing on or before the date of the maturity of the scheme. Growth and dividend (payout) option are offered under the scheme… Read more
“Is it right to expose an uninformed investor directly into the equity market” UK Sinha, SEBI Chairman, to PTI
BlackRock Investment Institute releases Europe on a Tightrope report
The BlackRock Investment Institute (BII) has released its latest publication, Europe on a Tightrope. In the report, the BII presents its views about why the European monetary union will survive and that–while a “Grexit” (Greece exit) cannot be ruled out–it is not a given. The next 30 days are critical and the European banking systems remains a worry.
The report talks about short- and long-term crisis. It says, “Today’s is all about funding while tomorrow’s is about structural reform, finding the right mix of spending cuts and growth, and—most difficult of all—giving up sovereignty.”
According to the report, the political and market turmoil is likely to intensify in the run-up to the Greek elections on 17th June. The election of an anti-austerity government could trigger a Greek default. This does not necessarily mean Greece would leave the eurozone, but it could spark bank runs that could potentially spread to Portugal, Spain and Italy… Read more
Canadian, German firms eye stake in Rel Cap unit: Reports
In a deal that could be valued at Rs. 15 billion, Canada's Intact Insurance and German insurer HDI-Gerling International Holdings have turned out to be the front runners to purchase 26% stake in the non-life insurance business of Reliance Capital, reports said.
UBS India has been appointed advisors to Reliance General, it said.
Canada's Intact Insurance is part of Toronto-based Intact Financial Corp, while HDI-Gerling is a subsidiary of Germany's third-largest insurer, Talanx.
The Anil Ambani controlled Reliance Capital has been looking to sell minority stakes in its key businesses to reduce the group's debt.